Financial Guaranty Insurance to Be Taken Over by New York

By David McLaughlin -
Jun 11, 2012

Financial Guaranty Insurance Co.
said it has consented to a proceeding in which New York’s
insurance regulator will take over the bond insurer.

Benjamin M. Lawsky, superintendent of the Department of
Financial Services, is seeking a court order directing the
department to take possession of FGIC’s assets and conduct its
business, according to court papers provided by the department.

FGIC consented to the so-called rehabilitation proceeding,
and Lawsky will file a plan “that will provide fair and
equitable treatment of FGIC’s policyholders and other
creditors,” the company said today in a statement.

FGIC Corp., the holding company for Financial Guaranty
Insurance Co., filed for bankruptcy in 2010. Financial Guaranty
Insurance Co. can’t file for Chapter 11 under federal bankruptcy
law and can only be “rehabilitated or liquidated” under state
insurance law, according to the court filing by the New York
attorney general’s office, which represents the Department of
Financial Services. The filing couldn’t immediately be confirmed
in court records.

A hearing in state Supreme Court to consider the
rehabilitation order is scheduled for June 28, FGIC said.